WASHINGTON–As many had forecast, the Federal Reserve has cut the federal funds rate. The Fed lowered rates 25 basis points to a target range of 1.75% to 2%. Three members of its Federal Open Market Committee (FOMC) voted against the decrease.
“Information received since the Federal Open Market Committee met in July indicates that the labor market remains strong and that economic activity has been rising at a moderate rate,” the Fed said. “Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports have weakened. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2%. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.”
In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee said in reducing rates its view is sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2% objective are the most likely outcomes, but uncertainties about this outlook remain.
“In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2% inflation objective,” the Fed said. “This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments."
Voting for the monetary policy action were Jerome H. Powell, chair, John C. Williams, vice chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Charles L. Evans; and Randal K. Quarles. Voting against the action were James Bullard, who preferred at this meeting to lower the target range for the federal funds rate to 1.50% to 1.75%; and Esther L. George and Eric S. Rosengren, who preferred to maintain the target range at 2% to 2.25%.